ChrisKraeuter

The loss of $854.7 million, even when excluding $620 million in one-time restructuring charges, was much wider than analysts expected, while revenue was slightly less than expected. However, the chip company said its cost reduction plans are on track and that it expects first-quarter sales to be flat to nominally higher.

After the announcement, shares
AMD, +1.47%
fell 49 cents to $6.70 in third-market trading after ending the regular session down 3.5 percent to $7.19.

CEO Hector Ruiz said the company met its goals for the quarter concerning items it can control, such as growing revenue sequentially, getting closer to breaking even, and getting the company restructured.

"There's no denying 2002 was an awful year, but we are confident the work is behind us," Ruiz said during a conference call. He set April as the month that AMD would launch its much-anticipated next-generation Athlon based on the company's Hammer technology.

"This is really a turn-around story and hopefully with good execution and higher-speed Athlons and Opterons they can get back to profitability and that's when they will attract growth investors again," said Krishna Shankar, analyst with JMP Securities.

Despite the losses posted during the quarter, Shankar said AMD was able to salvage some market share during the final three months of the year and that the cost reductions and inventory clean up AMD implemented has been done quickly.

AMD battles Intel
INTC, -0.68%
the largest chipmaker in the world, in the market for processing chips used in computers. Intel announced strong fourth-quarter financials the other day but cast a cautious view toward the coming quarter.

Fourth quarter

For the quarter ended in December, AMD reported it lost $854.7 million, or $2.49 a share, on revenue of $686.4 million. During the same quarter last year, AMD lost $15.8 million, or 5 cents a share, on revenue of $951.9 million.

During the third quarter, AMD lost $254.2 million, or 74 cents a share, on revenue of $508.2 million.

According to a company statement, computer chip sales and flash memory sales increased during the quarter and unit consumption of computer chips reached a record for the company.

AMD boosted its cash position to more than $1 billion but its long-term debt now stands at $1.78 billion, up from $1.2 billion during the previous quarter, due in part to a $400 million convertible bond offering during the quarter.

Spending on research and development increased 11 percent to $245 million while capital expenditures dropped 30 percent to $138 million.

Headcount dropped 2.9 percent to12,832 from 13,218. The number of employees at AMD will continue to decline through the second quarter as AMD aims for total job reductions of 2,000 since announcing the restructuring. Executives said the bulk of the quarter's charges related to costs associated with cutting staff and that no more charges should be necessary.

First quarter

For the first quarter, AMD said its overall sales will be flat to nominally higher while computer chip revenue will increase. The first quarter is typically a weaker quarter.

Also, AMD said it will begin to realize benefits from a previously detailed restructuring plan. AMD is trying to drive its cost structure below $800 million so it can break even by the second quarter.

AMD will begin rolling out new chips this year based on its Hammer technology, which allows a single semiconductor to process data in chunks of 64 bits and 32 bits. JMP's Krishna said the first of these new chips, the Athlon with a Barton core, will get AMD back into the performance driven, higher end processor market.

For the year, AMD lost $1.3 billion, or $3.81 a share, on revenue of $2.7 billion compared with a loss of $60.6 million, or 18 cents a share, on revenue of $3.89 billion in 2001.

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